Teen's Internet Scam Illustrates Growing Problem

by Chelsea J. Carter, Associated Press

In that light, the 17-year-old Orange County high school student is like a growing number of his peers. Law enforcement officials and cyberscam experts say the number of teen-agers perpetrating crimes via the Internet is rising.

Their crimes range from securities fraud to credit card and identity theft.

"We have seen a rise in the crimes, with an increasing degree of sophistication by a younger demographic," said FBI agent Frank Harrill of the Los Angeles cybercrime squad. "I think it's safe to say we are going to see more of it."

Last month, the Securities and Exchange Commission filed a civil complaint against Bartiromo, alleging he operated an international Internet scam that netted more than $1 million in six weeks. Bartiromo sold what he described as risk-free investments betting on sporting events, authorities said.

The majority of teen fraud tends to be on a smaller scale, such as online auction fraud and credit card theft, said Parry Aftab, a New York lawyer who trained thousands of adults and children on Internet safety.

In January 2000, four teen-age boys in Galloway Township, N.J., were arrested for stealing credit card numbers to make about $8,000 in purchases. The boys, ages 14 to 16, obtained the credit card numbers by tricking people into transmitting their account information over the Internet.

"It's easy for them to pull off," Aftab said. "A lot of teens don't take it seriously. They think it's a game."

Part of the reason may be that there are few consequences.

In 2000, 16-year-old Jonathan Lebed of Cedar Grove, N.J., faced only civil action by the SEC for manipulating stocks in what authorities called a "pump and dump" scheme.

Lebed bought large blocks of nine low-priced stocks, hyped them on Internet financial message boards and then - within 24 hours - sold his shares after the price rose.

Although investigators have said Lebed made close to $1 million, he settled the SEC case by agreeing to repay $285,000 without admitting or denying the allegations.

"The federal government is just not set up to deal with" prosecuting children, said Howard Friedman, who heads the Cybersecurity Law Institute at the University of Toledo in Ohio.

In Internet security fraud cases, the federal government often defers criminal prosecution of teens to local and state authorities, said FBI supervisory agent Brent Braun, who heads the Los Angeles office's securities fraud investigations.

Part of the reason is that the federal government lacks juvenile detention facilities, he said.

Teens who do get prosecuted by local or state authorities often receive light sentences, such as probation and fines.

Beyond changing the way the crimes are prosecuted, experts said teens' mindsets have to be changed.

"Certainly kids realize it's wrong to break in to their next-door neighbor's house. They also need to realize it's wrong to break in and steal things" on the Internet, said Chris Painter of the U.S. Department of Justice's Computer Crime and Intellectual Property section in Washington, D.C.

Part of the education must be aimed at parents, said Justin Hughes, a professor of Internet law at UCLA.

"Parents need to realize a networked computer in the hands of their children is a very different thing than a standalone computer 10 years ago," he said.

Under a preliminary settlement with the SEC, Bartiromo agreed to return about $900,000 of the $1 million authorities allege he bilked from about 3,000 investors. The money, found in an Internet account at a casino in Costa Rica, is being held by the SEC until the investigation is complete.

The Trabuco Hills High School senior still faces a civil complaint that could include thousands of dollars in fines.

Bartiromo's attorney, David Bayless, would not comment on details of the case. He also turned down requests for interviews with the teen and his family.

The SEC said in its lawsuit that Bartiromo defrauded investors through his "Invest Better 2001" Web site and bulletin board between Nov. 1 and Dec. 15.

He raised more than $1 million by selling what he described as "guaranteed" and "risk-free" investments in which he pooled investors' funds - collected with credit cards - to bet on sporting events. The scheme promised returns of 125 percent to 2,500 percent, the SEC said.

SEC officials also are investigating whether Bartiromo may have launched another Web site that appears to be fraudulent. The site, called goldcapsule.com, made similar investment promises, according to a declaration by SEC attorney Craig Warkol. It's no longer operating.

In addition to repaying the money, Bartiromo also is expected to file an accounting of his actions, outlining how he set up the investment program and how much money came in, SEC officials said.

Painter, of the Justice Department, said the solution to reducing such crimes among young people must reach beyond law enforcement efforts.

"We have to teach these kids some kind of cyberethics," he said.

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